Repayment Basics

Student loan timeline

Master Promissory Note (MPN): this is a legal agreement in which you promise to repay your loans to the Department of Education.

Entrance Counseling: this is where you learn about your loan before accepting the money.

Exit Counseling: this is where you learn about repayment and what happens if you don’t repay. You are required to complete exit counseling when you leave PCC or drop below half-time.

Grace Period: this is the six month period before you need to begin making your monthly loan payments.

Repayment: this is the time you need to make monthly loan payments until your loan is paid. A standard repayment is 10 years or 120 months.

Paid in Full!

Have a Happy Repayment

Repayment is when you pay back your student loans. After you graduate or drop below half-time (6 credits per term), you have a grace period of 6 months. After the 6 months are up, you have to start making payments on your loans. Here is what you need to know about repayment in a nutshell.

Making interest payments while you are in school

Most students defer payments until after graduation, but if you can, think about paying the interest while you are still in school. A small payment each month (around $30 bucks) can keep that interest from stacking up, which means that you will owe a lot less when you graduate.

For example: for a $5,000 loan, your monthly interest payments would be $28. If you paid this interest while in school, you would save $940!

1) Get to know your loans

First, you'll need to find out how much you owe and who you owe. You can find the amount of your loans and servicer by going to the National Student Loan Data System. This website stores all the information on your student loans.

2) Start making payments

For each loan you see in the National Student Loan Data System, follow these steps:

Go to the servicer's website and set up an account.

You'll automatically be set up on the standard payment plan. (You can change your plan - see more below.)

Make your payments on time!

3) Choose a repayment plan

You'll start off on the standard repayment plan, which is a great plan and you can stick with it if you want. However, there are other repayment plans that can make your monthly payments more affordable. The most important thing is that you make your monthly payments on time every month. If you fall behind, you get into loan delinquency and default and a world of trouble that you do not want - we'll talk about this on Consequences of Not Paying Your Loan on Time.

Repayment plans for a more affordable monthly payment:

Standard Repayment Plan

What is it? The most basic type of repayment plan is the Standard Repayment Plan. This is the default plan for most types of student loans. It breaks down your loan balance into monthly payments of at least $50 for up to ten years.

Who is it for? This is the plan that will cost you the least amount of money in interest payments.

Graduated Repayment Plan

What is it? Monthly interest payments start at a lower amount than under the Standard Repayment Plan and gradually increase – usually every two years – for up to ten years. This allows for flexibility at the beginning of the repayment period. However, you will pay more in interest than you would under the Standard Repayment Plan.

Who is it for? Borrowers whose income may start out low but is expected to increase.

Extended Repayment Plan

What is it? Borrowers are able to extend the repayment period from ten years to up to twenty-five years; however, they will end up paying more in interest than they would under the Standard Repayment Plan. Payments under the Extended Repayment Plan can be either standard or graduated.

Who is it for? Borrowers whose loan burden is too large to bear the standard monthly payments over the course of just ten years.

Income-Based Repayment Plan

What is it? Borrowers with a demonstrated financial hardship to limit their monthly loan payments, excluding parental PLUS loans, to 15 percent of their discretionary income (that is, the difference between their adjusted gross income and 150 percent of the poverty guideline for their individual situation). Under this plan, if the balance of the loan has not yet been paid off after 25 years, it can be forgiven. However, in most cases, borrowers will pay more in interest over the life of the loan.

Who is it for? Borrowers whose financial situation is unstable or is insufficient to bear the monthly payments under other repayment plans.

Pay as you go

What is it? This is a modification of the current Income Based Repayment Plan offered to borrowers with loans in the Direct Loan program. The new Pay As You Earn program will cap the annual payments at 10% of discretionary income and reduce the maximum repayment period to 20. It is for borrowers with partial financial hardship.

Who is it for? Direct loan borrowers whose financial situation is unstable or is insufficient to bear the monthly payments under other repayment plans.

Income-Contingent Repayment Plan

What is it? Monthly payments take into consideration annual income and family size as well as the total amount of the loans, and if a loan balance remains after 25, it may be forgiven. Unlike the Income Based Repayment Plan, borrowers need not be facing financial hardship to qualify for this plan. However, they will likely pay more in interest than in other repayment plans.

Who is it for? Direct loan borrowers who are not facing demonstrated financial hardship, but whose financial situation is insufficient to bear the monthly payments under other repayment plans.

Income-Sensitive Repayment Plan

What is it? Monthly loan amount that takes annual income into consideration. The length of the repayment period is up to ten years, and the balance is not forgiven at the end. Like other plans, borrowers will pay more in interest over other the standard repayment plan.

Who is it for? FFEL borrowers with whose financial situation may fluctuate over the course of the repayment period.

For more information on student loan repayment plans, visit studentaid.gov.

Did you know...

If you withdraw, drop, never attend or stop attending class you may be subject to repayment of financial aid funds (loans and grants). Additionally, you may owe the college for a portion of your tuition and fees.